By Maria Armental 
 

Network-equipment giant Cisco Systems Inc. reported a 9% sales decline in the most recent quarter, marking the first annual sales decline in three years as the pandemic-driven economic shock takes a toll on its core business of switches and routers.

This quarter, the San Jose, Calif.-based company expects to make 41 cents to 47 cents a share, or 69 cents to 71 cents a share as adjusted, with revenue declining 9% to 11%.

Analysts surveyed by FactSet expected an adjusted profit of 75 cents a share with revenue falling about 7% to $12.23 billion.

Cisco, considered a proxy for corporate high-tech hardware demand, has extended free offers and trials for its videoconferencing-service Webex and security offerings as companies moved to remote work during the pandemic. The offerings, company officials said, could deliver a revenue boost in future quarters.

More than half of its revenue now comes from software and services, Chief Executive Chuck Robbins said in a statement.

"As we focus on the future, we are rebalancing our R&D investments to focus on new areas so we can continue to offer customers the best, most relevant technology in simpler, more easily consumable ways," he said.

This month, it bought ThousandEyes Inc. to boost its network performance and monitoring across enterprise and into the cloud.

"If the pandemic response around the world has taught us anything, it's the timeliness of bringing ThousandEyes and Cisco technology together and providing it in the simplest possible way to our users right now," Todd Nightingale, senior vice president and general manager of Cisco's enterprise networking and cloud business, said in a conference call in May to discuss the acquisition.

Cisco didn't address its proposed acquisition of Acacia Communications Inc. in the earnings release. The deal, which was expected to close by the fourth quarter, awaited regulatory approval in China.

Revenue from Acacia will be included in Cisco's infrastructure platforms product category.

In the most recent quarter, ended July 25, revenue from that business, which includes routers and switches, fell 16%, while revenue from the applications business, which includes videoconferencing, fell 9%.

The one bright spot again was the small but fast-growing security segment, which posted a 10% revenue increase to $814 million.

Overall, revenue fell 9% to $12.15 billion.

Meanwhile, fourth-quarter profit rose 19% to $2.64 billion, or 62 cents a share. On an adjusted basis, profit fell to 80 cents a share from 83 cents a year earlier.

Cisco had projected 57 cents to 62 cents a share in profit, or 72 cents to 74 cents a share as adjusted, with revenue declining 8.5% to 11.5%. Analysts expected 65 cents a share, or 74 cents as adjusted, on $12.09 billion in revenue.

It ended the year at a profit of $11.21 billion on $49.30 billion in revenue, compared with a profit of $11.62 billion and $51.90 billion in revenue a year earlier.

 

Write to Maria Armental at maria.armental@wsj.com

 

(END) Dow Jones Newswires

August 12, 2020 16:38 ET (20:38 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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